I'm listening to the call now, I'll try to write down important new stuff.

CEO prepared remarks:

SSD stuffNAND industry supply conditions are the biggest factor limiting SIMO's growth. NAND flash makers are directing available flash to enterprise applications and away from client SSDs, and this trend increased in the past few months. Flash supply is inadequate for client SSD. Supply will improve over the next few quarters, and flash makers will transition from 256GB units to 512GB units.

SIMO expects to ship QLC client SSD controllers in H1 2018.

Flash makers are increasing CapEx, and the tightness since 2016 will reverse over time. NAND supply will reverse and become plentiful for a few years to come. Flash industry cyclicality has not changed, excess supply will come, it is just taking time.

Last year NAND makers took NAND from module makers to their own client SSD products, recently NAND makers have took NAND supply from their own client SSD products to their own enterprise NAND products. SIMO's pipeline is unchanged, the timing of client SSD projects has just been pushed back a bit. Programs will ramp in Q4 2017 and beyond.

We are well placed to benefit when NAND supply improves.

We have added a second customer for enterprise SSD controllers, and now have two hyperscale "direct" customers. One of these programs have been pulled in and will launch before the end of 2017.

eMMC/UFS stuff:

Our new UFS controller program remains on track, and we expect initial shipments to a top 5 Android OEM to begin later in 2017. For most cell phone makers we think eMMC will be preferred over UFS now due to price differences.

Shannon and Ferri:

Tight NAND supply limits out growth. If not for NAND supply both Shannon and Ferri would grow meaningfully this year. High grade NAND is available, but very expensive now. Ali Baba (he named the Chinese Shannon customer) continues to purchase Shannon products from us. Ferri is doing well. We have Japanese, European, Chinese and US commercial OEMs, and we have signficant orders we cannot fill because NAND flash is not available.

We have a strong pipeline and are well positioned in all three segments to rebound when more NAND supply comes on line.

CFO - Finances.

Client SSD controller sales we weak because high prices slowed adoption and NAND was directed toward enterprise. Beyond this year we remain confident of rapid growth, most future NAND products are much cheaper than current NAND, and the replacement of disk by SSDs will accelerate.

eMMC controller sales will decline in H2 as SK allocates flash from mobile to SSDs. Longer term eMMC will be stable (but this sounds like BS to me, I think they're losing SK's UFS biz).

Shannon and Ferri - SSD solutions will grow in Q3, and peak for the year.

Full year client SSD will be flat, eMMC down slightly, and SSD down by less than previous guidance.

Head count is 1,153. Tax was 22% compared to 27% in Q1. We think the effective tax rate will remain above 18% due to inability to realize tax benefits of entities generating pre-tax losses.

Balance sheet

Cash is up $86.9m year on year. Accounts receivable and inventory are both up a lot sequentially.

Revenue will rebound and gross margins will also rebound from Q3 weakness. Q3 projects were pushed back to Q4 due to NAND supply weakness.

Q&A:

eMMC in second half will be down compared to H1. SK Hynix built inventory of eMMC in Q2, and those numbers will decline in H2 as Sk will allocate flash to SSDs rather than mobile.

MRVL and internal solution are showing price competition? No changes to competitive landscape. We dominate the client SATA controller market, PCI controller products are coming on line later.

How can client SSDs sales be flat with Q1 down 20%, Q2 down 10% and Q3 down slightly? No real answer, but Q4 will rebound and client SSDs will be flat for the full year.

How do we know NAND capacity will expand going forward? It hasn't happened yet. Client SSD for SIMO will rebound whether NAND supply improves or not. We have a major PCIe program to launch in Q4 with 3D NAND.

For eMMC they may add a second NAND maker as OEM, and enter new markets other than smartphones.

Q When will supply-demand get more "normal"? A: Flash makers are ramping 3D NAND and spending Cap Ex to ramp capacity sooner. NAND makers are saying yield and output are ahead of expectation. This year the NAND growth is back half loaded, but 2018 should be a meaningful year for NAND supply growth. So early in 2018 or mid-2018 NAND supply should be more "normal".

10% of SIMO eMMC today goes into non-smartphone applications.

Ferri SSDs have a diverse customer base, Shannon is more concentrated at Ali Baba.

Do you plan to spend all $200m on the buyback? No real answer.

If you executed the entire buyback, are there any acquisition candidates for you? No answer, of course.

Charlie Chan of Morgan Stanley! How about SIMO's SSD growth versus the industry growth? SSD units are increasing even though supply is tight. Last year it was 40% and this year 45%. So....why isn't SIMO growing since the SSD client controller space is growing? Answer - we don't think we're losing market share. SSD prices have gone up a lot, and adoption is slowing. 64 layer and 96 layer NAND should push SSD prices down, and we think that will cause SSD adoption to accelerate. We don't think adoption is increasing in 2017.....

Charlie Chan of MS on Op Ex - Is Op Ex for SIMO in Q3 going down? A: It should be stable in Q3 compared to Q2. Enterprise SSD controllers are contributing to OpEx now, but not yet shipping.

Charlie Chan of MS asks.....will NAND supply increase soon? You were wrong earlier in the year when you said Q3 or so, why should we trust your view now? A: We use the rolling guidance from our customers, and they have been inching higher especially in Q4.

The proportion of Ali Baba where SIMO buys the flash is higher this year than last year.

Again, client industry growth is about 10% to 15% in 2017. But SIMO client SSDs are expected to be flat. Why? A: We think your industry forecast is wrong.

Which products have the strongest visibility for Q4, which is most risky? We are confident across the board for our key products - client SSDs, eMMC and SSD solutions.

Q4 gross margins will snap back due to material rebound in high gross margin client SSD solutions and decline in Ali Baba 2017 program in Shannon Systems. And in Q1 2018 we can renegotiate pricing based on higher prices.

Why is Q3 declining sequentially? Tight NAND and their customers are rebalancing to non-SIMO products.

Desktop demand remained weak in the first half of 2017, but is expected to start growing in the third quarter driven by new products from AMD and Intel for the gaming and high-end desktop markets, according to sources from the upstream supply chain.

AMD's new top-end 16-core Ryzen Threadripper 1950X and 12-core 1920X will become available in the retail channel on August 10, while its 8-core 1900X is scheduled to be released at the end of August.

Several vendors have already begun accepting pre-orders for desktop models using AMD's latest top-end CPU processors since the end of July including the Alienware Area-51 Threadripper from Dell.

AMD also recently announced its new Vega-based GPUs including the Radeon RX Vega 64, using either liquid or air cooling modules, and Radeon RX Vega's prices start from US$399. AMD also offers free games and discounts on hardware including Samsung's CF791 monitor as well as price-cuts on CPU/motherboard bundles to help consumers save up to US$300.

Intel has also prepared to release its next-generation 14nm Coffee Lake processors in the near future and will initially launch products such as the Core i7 8700K.

AMD and Intel are also seeing growing sales in the server ssegment. AMD's EPYC 7000 series processors were unveiled at the end of June. Although the processor series currently only accounts for less than 1% of the server market, orders for related server makers have been picking up recently and are expected to stay strong in the second half of 2017 with players including Microsoft, Baidu, Dell, Hewlett-Packard (HP), Supermicro, Inventec, Wistron, Asustek Computer, Gigabyte Technology and Tyan eagerly promoting their systems.

Intel debuted its Purley server platform in July and is currently seeing strong orders from enterprises looking to replace their existing server systems. Some market watchers believe the replacement trend will last for a whole year and shore up Intel's profitability and revenues.

The numbers in this article are really hard to jive with SIMO's eMMC performance over the past two years. In 2016 SIMO grew eMMC sales 55%, and this year they are expected to grow them 5%. The cheap Chinese phone brands are always said to be SK Hynix-SIMO customers.

The article indicates the Chinese brand in Q2 2017 grew ~39% over Q2 2016. SIMO's eMMC isn't growing anywhere close to that rate this year, although SIMO's eMMC rate was way ahead of everyone last year. Sorta mysterious.....

Chinese brands accounted for nearly half of global smartphone shipments in second quarter

Global shipments grew at 3 per cent, reaching 365 million in the period, with Chinese brands achieving a record 48

Chinese brands accounted for nearly half of global smartphone shipments in the second quarter of 2017 as they continued to expand aggressively beyond their home market, according to a report from Counterpoint Research.

Global smartphone shipments grew at 3 per cent year-on-year, reaching 365 million units in the quarter, but the growth of key Chinese smartphone brands significantly outpaced the entire industry, leading to a record 48 per cent share of shipments worldwide, a 39 per cent jump from two years ago, according to the Wednesday report.

Beijing-based Xiaomi has shown the fastest growth among top Chinese brands with its global shipments surging 60 per cent in the period, followed by Vivo’s 45 per cent and Oppo’s 33 per cent.

The growth rates of Samsung Electronics and Apple – the world’s top two smartphone brands – were at 4 and 2 per cent respectively, said Counterpoint Research.

“Chinese brands have been successful in not only cementing their positions at home, but also managing to expand beyond mainland China at the same time,” said Tarun Pathak, associate director at Counterpoint Research.

And then there's this article, that indicates demand for NAND is going up due to ..... Chinese smartphone demand. Perhaps SK Hynix-SIMO's eMMC business has lost some share to Samsung? It's hard to reconcile demand for Chinese smartphones increasing, while SIMO expects it's eMMC sales to decline sequentially as SK Hynix shifts its NAND production toward SSDs rather than mobile.

TOKYO -- Prices of semiconductor memory chips are on the rise, as shortages that began last year are exacerbated by smartphone production entering into full swing in the summer.

NAND flash memory delivery prices for manufacturers in July stood at around $3.50, up 13% from a month earlier, for the benchmark 64 gigabit, triple-level cell type used in personal computers. "We do not ship even half of the orders that come in," said the Japanese arm of Taiwanese chipmaker Transcend Information.

DRAM memory prices rose 3% on the month to about $3.10 for the standard 4Gb DDR3.

Chip supply is tightening as smartphone manufacturers ramp up production ahead of the end of the year. Up-and-coming Chinese smartphone makers like Vivo and Oppo Electronics adjusted output in the January-June period, but local shipments as well as those to emerging nations are healthy. Production looks to have recovered to previous-year levels in July.

With the growing popularity of transmitting videos and high-resolution images, China's Huawei Technologies and others are generating strong sales of smartphones equipped with higher storage capacity.

Chipmakers appear to be prioritizing shipments for smartphones, for which demand is on the rise, in turn squeezing supply for use in PCs.

Nintendo, which is seeing solid sales of its Switch game console, announced plans to boost production in July and August. Since the console uses the same DRAM chips as smartphones, the component's shortage may worsen down the line.

Higher costs for such an essential component will likely cause prices of the final product to surge. Apple's new iPhone, set for release as early as this fall, is expected to cost more than $1,000 for its top pricing model, says Yasuo Nakane, a senior analyst at Mizuho Securities. PC makers will "likely limit the frequency of discounts they offer after sales begin," according to a major domestic manufacturer.

WDC/SNDK SSD with 3D NAND and MRVL controllers with internally developed firmware.

I wonder if this is share loss for SIMO. WDC/SNDK is a SIMO SSD controller customer, but I don't know the product lines well enough to know what this is replacing.

Anybody know if this is a client or enterprise SSD? It sounds like a client SSD, which could be a SIMO controller, but isn't....

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Western Digital has started to ship its SanDisk Ultra 3D drives based on 3D TLC NAND memory. The drives, which were formally introduced nearly two months ago, are identical in terms of hardware to the WD Blue 3D NAND SATA SSD, but come in different form-factors. As for pricing, Western Digital wants the SSDs to be affordable, which is why it sells the 1 TB models at below $300, in line with competiting drives from Crucial and Mushkin.

As reported, the SanDisk Ultra 3D as well as the WD Blue 3D NAND SATA are based on the Marvell 88SS1074 controller and use Western Digital’s 64-layer BiCS 3D NAND TLC memory. The drives take advantage of Marvell’s third-generation NANDeXtend LDPC-based ECC technology, but come with proprietary firmware developed in-house. The new products made in 250 GB, 500 GB, 1 TB and 2 TB configurations, but in different form-factors: the WD Blue 3D NAND SATA SSDs come in 2.5"/7mm and M.2-2280 form-factors, whereas the SanDisk Ultra 3D SSDs are only available in 2.5"/7mm DFF packaging.

Western Digital rates its 3D TLC NAND-based drives for 1.75 million hours MTBF, which is higher than their drives featuring planar TLC memory, but a bit lower than the MTBF number offered by some competing drives. Meanwhile, the TBW ratings of the drives range from 100 TBW for the 250 GB models to 500 TBW for the 2TB models. Being a bit cautious with reliability/endurance ratings is normal because companies typically do not want elevated expectations when they deal with a new type of memory.

From performance point of view, the new SanDisk and WD-branded drives and offer up to 560 MB/s sequential read speed and up to 532 MB/s sequential write speed (when pseudo-SLC cache is used to boost write speed), which is comparable to other mainstream SATA SSDs. As for random reads and writes, we are looking at 95K IOPS and 84K IOPS, respectively, again, in line with what competing drives offer.

In the latest short position update, SIMO's short balance moved up a bit to 4.1 million shares from a previous 3.9 million.

However, the 4.1 million shares short number is from the day before they released their Q2 earnins and guidance, and the following day SIMO jumped $3.50 per share on 2.9 million shares trade. I was really surprised at that up move in the share price in the face of lousy Q3 guidance. Maybe it was shorts covering because "all the bad news is out, the good stuff is coming", or maybe not, who knows?

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Recently NAND makers MU and WDC are experiencing declining share prices despite super strong quarterly results and guidance. This happens in memory cycle peaks. So......hopefully the long awaited switch from under production to over production is taking place. When the NAND makers can't meet demand, they direct the majority of their NAND production to enterprise NAND applications since those have the highest profit margins. When NAND production is in over supply, they direct their NAND to anything that will sell, which includes SIMO's client side products, so we need NAND to enter excess production and over capacity so that the client side products get their boost in units, and SIMO's controllers sales jump as a result.

Some nuggets related to SIMO from MRVL's call. MRVL is SIMO's main merchant competitor for SSD controllers.

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We achieved this upside by stronger than expected growth of our SSD products for the enterprise and datacenter market. Our SSD business grew sequentially and now accounts for more than 25% of our storage revenue. We achieved this growth despite supply constraints in the NAND market.

We continue to believe that the storage market transition from HDD to SSD will be positive for Marvell. As an example, we estimate that our total storage sales into notebooks will grow in fiscal 2018 versus fiscal 2017 with growth in SSD sales more than offsetting the decline in HDD sales.

Storage accounted for 52% of revenue and grew 13% year-over-year, driven by the rapid revenue ramp of SSD products and our increased market presence in enterprise and the data center market with our broad HDD and SSD product portfolio.

One of your primary competitors on the SSD controller has been struggling with the ability to fully procure NAND. So, I was just hoping you could talk about the opportunity to gain share in the low-end SSD SoC market, and made some of this market dislocation going into the back half of the year.

we’ve performed very well as a company in SSD, and we have gained substantial market share, if you look and integrate back over the last year or so. So, that business continues to be on a very positive trajectory. We do view ourselves as being a very -- the broadest supplier of IP and solutions from clients, all the way to the cloud and the enterprise and the data center. As you mentioned, there is competition as some of those competitors are focused in very specific segments, some in the lower end. That’s a segment that we’re not ignoring. We have purpose-built solutions for that market and we plan to be competitive, certainly in that segment, whether its Marvell or our competitor or just in general in the market, the bulk of the NAND is not being allocated there. So, that’s just an industry issue. But we certainly intend to benefit when the overall industry re-bounce, we intend to be competitive across the span of our portfolio.